Income tax payments by the salaried class have surged to Rs285 billion in the first seven months of the fiscal year, which is Rs100 billion more than the same period last year. The tax burden exceeds the government’s full-year estimate by Rs25 billion. Minister of State for Finance Ali Pervaiz Malik acknowledged that the salaried class is under significant financial strain and hinted that some of the burden would be shifted to other sectors in the upcoming budget.
Income Tax Burden on Salaried Class:
- Income tax payments by the salaried class have reached Rs285 billion in the first seven months of the fiscal year, a rise of Rs100 billion compared to the same period last year.
- The tax burden in this period exceeds the government’s full-year estimate by Rs25 billion, indicating a significant overachievement in income tax collection from salaried individuals.
- Minister of State for Finance Ali Pervaiz Malik acknowledged that the tax burden on the salaried class is above its capacity to pay and stated that some of it will be shifted to other sectors in the upcoming budget.
Tax Payment Details:
- Between July and January, salaried individuals paid Rs285 billion in income tax, up from Rs185 billion in the same period last year.
- This increase of Rs100 billion (or 53%) comes despite the high cost of living and lack of corresponding social benefits.
- The tax paid by the salaried class in the previous fiscal year was Rs368 billion.
- Additional burdens, including Rs75 billion imposed last year for the IMF programmer, have already been surpassed with five months remaining in the fiscal year.
Sector-Specific Tax Payments:
- Non-corporate sector employees paid Rs122 billion, a 41% increase of Rs36 billion.
- Corporate sector employees paid Rs86 billion, a 50% increase of Rs28.6 billion.
- Provincial government employees contributed Rs48 billion, a 96% increase of Rs23 billion, while federal government employees paid Rs29 billion, 63% more than the previous year.
- However, the government has faced challenges in collecting taxes from wholesalers and traders, with non-registered traders’ tax deductions being the only success indicator.
Challenges in Other Sectors:
The National Assembly delayed the approval of a bill aimed at banning economic transactions by ineligible persons in the real estate sector. Minister Ali Malik also highlighted that high taxes on the beverage industry have led to an increase in informal production. Smuggled and unregistered children’s nutrition products were displayed at a seminar, showing the risks posed to public health by unregulated goods.
SIFC’s Role in Investment Facilitation:
Jameel Qureshi, the Secretary to the Special Investment Facilitation Council (SIFC), discussed efforts to improve investment and remove business barriers. SIFC is also working to make the Pakistan Sovereign Wealth Fund operational. However, the fund’s governance and legal structure have faced objections, particularly regarding the sale of state assets to foreign countries. Qureshi emphasized the importance of transitioning to an export-led growth model, reducing electricity prices, and improving the investment climate.
The salaried class continues to face a heavy tax burden, with payments far exceeding government estimates. While the government plans adjustments in the budget, the issue remains pressing as the cost of living rises. At the same time, efforts by bodies like SIFC to boost investment are hindered by unresolved legal and governance issues. Additionally, the government’s struggle to combat informal markets and ensure tax compliance highlights the broader challenges facing Pakistan’s economic growth.